Retired Couples Need $220K for Health Care

iStockphoto/Thinkstock(NEW YORK) — A 65-year-old couple needs $220,000 to cover their health care costs in retirement, according to a study by Fidelity.

While the figure seems mind-boggling to many Americans, especially those in or nearing retirement, the amount a couple needs for health care costs dropped 8.3 percent since last year’s $240,000 figure because of lower-than-expected Medicare spending and lower projections for such spending.

“I think most interesting is that this year retirees or those who are going to retire have some good news for a change,” said Sunit Patel, senior vice president of Fidelity’s consulting group.

This year’s figure was calculated for a couple, both of whom have reached the age of 65, including a man who will live to age 82 (with $100,000 needed for him) and a woman who will live to age 85 ($120,000 for her).

“In the health care space, health care costs have been growing faster than most individuals’ incomes,” said Patel.

Fidelity’s annual estimates apply to retirees with traditional Medicare insurance coverage, not higher income-related premiums, and do not include nursing home care.

As part of the estimate, Fidelity looked at monthly expenses associated with Medicare Part B and D premiums, co-payments, co-insurance and deductibles, such as for doctors’ office visits and outpatient services. The estimate takes into account out-of-pocket costs for things such as vision and hearing exams, eyeglasses and hearing aids.

Fidelity’s estimate increased an average of 6 percent annually between 2002 and 2012. It decreased only once previously. In 2011, the estimate dropped because of lower out-of-pocket costs for prescription drugs.

The costs increase, of course, for those who retire in 2013 and live longer than the projected ages for men and women. Men who are 65 years old, retire this year and live to age 85 will need $120,000. Women who retire at 65 in 2013 and live to the age of 88 will need $140,000. That couple has a 50-percent chance of living that long.

Men who are 65 years old, retire this year and live to age 92 will need $170,000. Women who retire at 65 in 2013 and live to age 94 will need $185,000. In total, a couple who meets that criteria, both with a 25-percent chance of living that long, will need $355,000 to cover their health expenses.

Here’s how Fidelity’s estimates for retiring couples’ health care costs have changed since the company started this study in 2002 (with the +/- percentage change from the previous year):

-8.3 percent
2013
$220,000

4.3 percent
2012
$240,000

-8.0 percent
2011
$230,000

4.2 percent
2010
$250,000

6.7 percent
2009
$240,000

4.7 percent
2008
$225,000

7.5 percent
2007
$215,000

5.3 percent
2006
$200,000

8.6 percent
2005
$190,000

2.9 percent
2004
$175,000

6.3 percent
2003
$170,000

2002
$160,000

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